Question

Delta Enterprises, Inc. has a WACC of 12.50% and is considering a project that requires a cash outlay of $2,795 now with cash inflows of $595 at the end of each year for the next 10 years. What is the project's MIRR? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Answer 1

Initial Cash Outflow = $2,795
Annual Cash Inflow = $595
Period of Project = 10 years
WACC = 12.50%

Future Value of Cash Inflows = $595*1.1250^9 + $595*1.1250^8 + ... + $595*1.1250 + $595
Future Value of Cash Inflows = $595 * (1.1250^10 - 1) / 0.1250
Future Value of Cash Inflows = $595 * 17.978568
Future Value of Cash Inflows = $10,697.24796

MIRR = (Future Value of Cash Inflows / Present Value of Cash Outflows)^(1/n) - 1
MIRR = ($10,697.24796 / $2,795)^(1/10) - 1
MIRR = 3.827280^(1/10) - 1
MIRR = 1.1436 - 1
MIRR = 0.1436 or 14.36%

MIRR of the project is 14.36%